Travelzoo Reports First Quarter 2014 Results

  Travelzoo Reports First Quarter 2014 Results  Business Wire  NEW YORK -- April 17, 2014  Travelzoo Inc. (NASDAQ:TZOO):  First Quarter 2014 Financial Highlights:    *Revenue of $40.2 million, down 5% year-over-year   *Operating profit of $7.0 million, down 13% year-over-year   *Net income of $4.6 million   *Earnings per share of $0.31, compared to $0.36 in the prior-year period  Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March31, 2014, with revenue of $40.2 million, a decrease of 5% year-over-year. Operating profit was $7.0 million, down 13% year-over-year. Net income was $4.6 million, with diluted earnings per share of $0.31, down from $0.36 in the prior-year period.  "Our European business delivered strong results. North America reported weak revenue. North America was impacted by a reduction in Search marketing spend and slow Local voucher sales," said Chris Loughlin, chief executive officer. "A positive highlight is the record number of mobile downloads we saw in the quarter. We believe in our strategy of quickly adapting to mobile usage."  North America  North America business segment revenue decreased 12% year-over-year to $26.4 million. Operating profit for the first quarter was $4.6 million, or 17% of revenue, down from $5.5 million, or 18% of revenue, in the prior-year period.  Europe  Europe business segment revenue increased 13% year-over-year to $13.8 million. In local currency terms, revenue increased 6% year-over-year. Operating profit for the first quarter was $2.4 million, or 17% of revenue, down from $2.6 million, or 21% of revenue in the prior-year period.  Subscribers  Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.6 million as of March31, 2014, up 1% from December31, 2013. In North America, total unduplicated number of subscribers was 16.7 million as of March31, 2014, up 1% from December31, 2013. In Europe, total unduplicated number of subscribers was 6.9 million as of March31, 2014, up 2% from December31, 2013.  Update on Hotel Booking Platform  Travelzoo launched the first phase of its hotel booking platform at the end of March. A select group of U.S. subscribers can now book hotels any night of the year through Travelzoo. "We are working with many new hotels that previously were unable to accept the Local voucher format," said Chris Loughlin, chief executive officer. "The new platform also makes it easier for our subscribers to book a hotel deal on their mobile phones." The hotel booking platform is expected to begin contributing to revenues in the second quarter, an average of 60 to 70 days after bookings occur. Travelzoo recognizes revenueupon the hotel stay and not at the time of booking.  Income Taxes  Income tax expense was $2.5 million, compared to $2.5 million in the prior-year period. The effective income tax rate was 35%, up from 31% in the prior-year period.  Asset Management  During the first quarter of 2014, Travelzoo generated $1.8 million of cash from operating activities. Accounts receivable increased by $52,000 over the prior-year period to $15.4 million. Accounts payable increased by $2.1 million over the prior-year period to $29.0 million. Capital expenditures were $1.0 million, up from $900,000 in the prior-year period. As of March31, 2014, cash and cash equivalents were $61.0 million.  Conference Call  Travelzoo will host a conference call to discuss first quarter results at 11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to    *download the management presentation (PDF format) to be discussed in the     conference call;   *access the webcast.  About Travelzoo  Travelzoo Inc. is a global Internet media company. With more than 27million subscribers in North America, Europe, and Asia Pacific and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel and entertainment companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value. In Asia Pacific, Travelzoo is independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan K.K. under a license agreement with Travelzoo Inc.  Certain statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include, but are not limited to, statements about our plans, objectives, expectations, prospects and intentions, markets in which we participate and other statements contained in this press release that are not historical facts. When used in this press release, the words “expect”, “predict”, “project”, “anticipate”, “believe”, “estimate”, “intend”, “plan”, “seek” and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including changes in our plans, objectives, expectations, prospects and intentions and other factors discussed in our filings with the SEC. We cannot guarantee any future levels of activity, performance or achievements. Travelzoo undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release. Travelzoo and Top 20 are registered trademarks of Travelzoo. All other names are trademarks and/or registered trademarks of their respective owners.                                            Travelzoo Inc.  Condensed Consolidated Statements of Operations  (Unaudited)  (In thousands, except per share amounts)                                                                                 Three months ended                                  March 31,                                  2014         2013 Revenues                         $  40,195   $  42,177 Cost of revenues                 4,777        3,985 Gross profit                     35,418       38,192 Operating expenses: Sales and marketing              17,843       19,659 General and administrative       10,578       10,497 Total operating expenses         28,421       30,156 Income from operations           6,997        8,036 Other income                     122          31 Income before income taxes       7,119        8,067 Income taxes                     2,481        2,472 Net income                       $  4,638    $  5,595 Net income per share:                         Basic                            $  0.31     $  0.36 Diluted                          $  0.31     $  0.36 Weighted average shares: Basic                            14,880       15,362 Diluted                          14,970       15,371                                                                                                              Travelzoo Inc.  Condensed Consolidated Balance Sheets  (Unaudited)  (In thousands)                                                                                                                  March 31,     December 31,                                               2014                2013 Assets Current assets: Cash and cash equivalents                     $   61,035          $  66,223 Accounts receivable, net                      15,355              13,986 Income taxes receivable                       1,388               2,656 Deposits                                      251                 396 Prepaid expenses and other current            2,538               3,202 assets Deferred tax assets                           1,067               1,143 Restricted cash                               —                   200 Funds held for reverse/forward stock          212                13,668      split Total current assets                          81,846              101,474 Deposits, less current portion                1,231               1,168 Deferred tax assets, less current             2,032               2,032 portion Restricted cash                               1,480               1,479 Property and equipment, net                   10,305              8,245 Intangible assets, net                        349                404         Total assets                                  $   97,243         $  114,802  Liabilities and Stockholders’ Equity Current liabilities: Accounts payable                              $   28,999          $  31,766 Accrued expenses                              9,820               10,543 Deferred revenue                              1,688               1,578 Deferred rent                                 271                 281 Income tax payable                            726                 — Reserve for unexchanged promotional           11,500              12,726 shares Payable to shareholders for                   212                13,668      reverse/forward stock split Total current liabilities                     53,216              70,562 Long-term tax liabilities                     10,546              10,436 Deferred rent, less current portion           3,111              2,469       Total liabilities                             66,873             83,467      Common stock                                  163                 163 Treasury stock                                (21,231      )      (15,662    ) Additional paid-in capital                    10,642              10,247 Accumulated other comprehensive loss          (613         )      (530       ) Retained earnings                             41,409             37,117      Total stockholders’ equity                    30,370             31,335      Total liabilities and stockholders’           $   97,243         $  114,802  equity                                                                                                                                Travelzoo Inc.  Condensed Consolidated Statements of Cash Flows  (Unaudited)  (In thousands)                                                                                                        Three months ended                                                    March 31,                                                    2014          2013 Cash flows from operating activities: Net income                                         $  4,638      $  5,595 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                      701            716 Deferred income taxes                              76             193 Stock-based compensation                           395            307 Provision for losses on accounts receivable        (52        )   95 Net foreign currency effects                       (9         )   94 Changes in operating assets and liabilities: Accounts receivable                                (1,288     )   (2,036     ) Deposits                                           133            (155       ) Income tax receivable                              1,266          1,564 Prepaid expenses and other current assets          447            350 Accounts payable                                   (2,984     )   (549       ) Accrued expenses                                   (1,294     )   850 Deferred revenue                                   110            (517       ) Deferred rent                                      5              (110       ) Income tax payable                                 722            — Reserve for unexchanged promotional shares         (1,226     )   — Other non-current liabilities                      111           103         Net cash provided by operating activities          1,751         6,500       Cash flows from investing activities: Release of restricted cash                         200            — Purchases of property and equipment                (1,019     )   (900       ) Net cash used in investing activities              (819       )   (900       ) Cash flows from financing activities: Repurchase of common stock                         (5,569     )   — Reverse/forward stock split, including             (479       )   —           transaction costs Net cash used in financing activities              (6,048     )   —           Effect of exchange rate on cash and cash           (72        )   (1,662     ) equivalents Net increase (decrease) in cash and cash           (5,188     )   3,938 equivalents Cash and cash equivalents at beginning of          66,223        61,169      period Cash and cash equivalents at end of period         $  61,035    $  65,107  Supplemental disclosure of cash flow information: Cash paid for income taxes, net                    $   335        $   10                                                                                                                                                   Travelzoo Inc.  Segment Information  (Unaudited)  (In thousands)                                                                              Three months       North                        Elimination ended March                              Europe     and Other       Consolidated 31, 2014           America Revenue from unaffiliated       $      26,353         $    13,842        $     —         $   40,195 customers Intersegment       221                   12                 (233)           — revenue Total net          26,574                13,854             (233)           40,195 revenues Operating          $      4,604          $    2,393         $     —         $   6,997 income                                                                              Three months       North                                    Elimination ended March                              Europe             and Other       Consolidated 31, 2013           America Revenue from unaffiliated       $      29,911         $    12,266        $     —         $   42,177 customers Intersegment       262                   108                (370)           — revenue Total net          30,173                12,374             (370)           42,177 revenues Operating          $      5,484          $    2,552         $     —         $   8,036 income  Contact:  Media: Travelzoo Inc. Glen Ceremony, +1-212-484-4998 Chief Financial Officer pr@travelzoo.com  
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